2022 Will Be the ‘Do Or Die' Moment for Congress to Take Action Against Big Tech

• Next year could be a pivotal one for tech legislation and regulation in the U.S.
• But Congress must still jump some hurdles to pass new laws, and the upcoming midterm season leaves a short window for getting things done.
• Proposals to update competition law, establish online privacy rights and protect kids from harm on the internet have bipartisan support.

The new year could be a pivotal one for tech policy — if Congress can move to act before the 2022 midterm season kicks into high gear.

Proposals to update competition law, establish online privacy rights and protect kids from harm on the internet have broad bipartisan support. But persisting differences on the best way to craft those laws as well as the presence of many other pressing legislative priorities have so far kept many significant bills from advancing.

With dozens of bills drafted and renewed outrage from lawmakers over the potential harmful impacts of internet platforms such as Meta's Facebook and Google's YouTube ignited by a former Facebook employee's testimony and leaked documents, there could just be enough momentum to advance some of the proposals.

And in the meantime, government agencies are likely to forge ahead with renewed regulations.

Republican takeover of House could stall antitrust legislation

There's a lot going on in antitrust that could come to a head in 2022. That spans legislation, as well as possible regulations and enforcement actions from the Federal Trade Commission and Department of Justice Antitrust Division.

"The likely Republican takeover next fall means 2022 is do or die for tech antitrust legislation," said Paul Gallant, managing director of Cowen's Washington Research Group. "That's the biggest risk for the companies in Washington. If they can manage to ward that off, we probably won't see it reemerge until 2025."

A package of tech-focused antitrust bills has already crossed a major hurdle in the House, advancing with bipartisan votes out of the Judiciary committee. But even then, lawmakers expressed reservations about the bills, and companion legislation in the Senate must still clear that initial hurdle.

Rep. David Cicilline, D-R.I., who chairs the Judiciary subcommittee on antitrust and spearheaded the package, told CNBC in a phone interview in mid-December that his staff has been working to bring other members up to speed on the legislation. The bills were born out of a 16-month investigation by the subcommittee into the competitive practices of Amazon, Apple, Facebook and Google, which found each wields monopoly power and recommended legislative changes to promote competition in digital markets.

Cicilline said while some of his colleagues may have voiced hesitancy around the bills at first, "When people study the bills and are briefed by my staff, there is tremendous support for the entire package."

He said he was optimistic the bills will ultimately "enjoy strong bipartisan support when they are brought to the floor either as a group or in two groups, say."

"I have great confidence that we'll pass them," he said.

That makes timing a key remaining obstacle for the bills as Congress continues to focus on the impact of the coronavirus pandemic and Biden's social infrastructure package, which the Senate has not passed.

"The window for passing tech antitrust legislation is open until Labor Day. And that's it," Gallant said.

"I think the key is whether Biden gets involved," he added. "If Biden decides it's important for the party to pass tech antitrust legislation, he can give it the momentum to get it across the finish line."

Cicilline said administration officials "worked closely with us" as the bills came together and said they remain "in very regular contact with all the key players in the administration who are in charge of competition policy."

Still, the White House will have to decide which legislative priorities to throw its weight behind ahead of a midterm season that will determine how much of Biden's agenda can be carried out before the end of his term. Gallant said that among the many priorities "tech antitrust is on the list." But whether it makes the final cut is still "TBD," he said.

Among the proposed bills, the American Innovation and Choice Online Act, introduced by Sens. Amy Klobuchar, D-Minn., and Chuck Grassley, R-Iowa, in the Senate as a companion to Cicilline's bill in the House, has gained significant traction. Grassley's support, among with several other Republicans, shows promise for the proposal, which would prohibit dominant platforms from discriminating against businesses that rely on their services.

Meanwhile, antitrust regulators will continue to forge ahead in 2022, with the FTC and the DOJ's Antitrust Division each gaining progressive chiefs this year in Lina Khan and Jonathan Kanter, respectively.

They each inherited major lawsuits and probes into Big Tech companies that are expected to continue under their watch. And the FTC has signaled it will weigh rulemaking on key competition issues such as labor and consumers' right to repair products without voiding their warranties.

"The enforcement agencies will probably be taking the lead as Congress tries to sort out what is not possible," said Sarah Miller, executive director of the American Economic Liberties Project, which advocates for stronger antitrust measures.

The FTC and DOJ both continue to prosecute Facebook and Google, respectively, on antitrust grounds. The FTC recently filed an amended complaint against Facebook after a judge initially dismissed its claims but gave it another chance to make its case.

The FTC has also reportedly been probing Amazon while the DOJ has reportedly taken on Apple. Of the two, Gallant predicted an Apple lawsuit would be more likely to come in 2022, partially due to resource constraints at the FTC, though he believes it's more likely than not that Amazon will eventually face an antitrust challenge as well. Gallant predicted a DOJ and state suit against Apple would look similar to Epic Games' lawsuit against the company, though potentially it would be even more expansive.

The agencies will also determine how they will handle merger enforcement, with the FTC already giving early indications that it could view more deals as anticompetitive. Still, a historic merger surge has tested limited resources.

"Working against the FTC is the fact that they do have to proactively block mergers," said Miller. With each decision about whether to block a merger or pursue a conduct case, Miller said, the agency has to ask, "Do we think that if we move forward that we'll regret it later because we'll get tied up?"

Privacy

Lawmakers have seemed to be at a standstill on broad privacy legislation for a while, though on the surface they appear to be relatively close on the key issues and express urgency about getting a law on the books.

Caitriona Fitzgerald, deputy director of the Electronic Privacy Information Center, which advocates for strong privacy laws, said the lack of action comes down to a "priority issue."

"We're seeing enough indications from agencies that it's a priority that I think it's definitely something that's on the Biden administration's mind and that hopefully next year it will be something they want to act on," she said.

The two issues Democrats and Republicans have diverged on are whether a digital privacy bill should include private rights of actions so individuals can sue over violations of their data rights and whether the federal bill should preempt state laws. Though both sides have left openings for compromise, the U.S. ends 2021 without a digital privacy law in place.

A Republican aide for the House Energy and Commerce committee, who asked not to be named because the aide could only speak anonymously about future legislation, told CNBC in an interview that staff was "making some pretty good progress" before Covid hit and "everything kind of stalled." The aide said Democrats seemed "pretty content" with letting California's privacy law play out as effectively the primary law in that space, while Republicans favor a national option that will preempt state laws.

A representative for the committee's Democrats did not immediately respond to a request for comment.

Still, new understandings of tech's impact on children, in part based on leaked documents by former Facebook employee Frances Haugen, breathed new life into the issue, at least as it pertains to kids. But Fitzgerald warned that Congress should not lose sight of passing a comprehensive privacy law, even if a bill focused on children would seem more politically feasible.

"It can't be that like a switch flips when someone's 18 years old and then their privacy's gone," she said. "So in this Congress, where big legislative packages are few and far between, I would hope that if they do something on privacy that it protects everyone, not just kids."

In the meantime, the FTC has also signaled that it will consider privacy rule-making, and the Commerce Department's National Telecommunications and Information Administration has said it will solicit comment on data privacy issues.

Kids-focused legislation

Legislation to protect kids' well-being online is well-positioned to advance next year, in part due to the widespread outrage and concern members expressed following revelations about Facebook's impact on young users through internal research leaked by Haugen.

While Gallant said he's "skeptical that even the Haugen revelations fundamentally change the privacy calculations in Congress," he said an update to the Children's Online Privacy Protection Act from Sen. Ed Markey, D-Mass., "has a solid chance of moving through both houses in '22."

The emergence of internal Facebook research showing the company had observed significant harmful effects of its products on a small number of young users angered members of Congress on both sides, resulting in several hearings with executives where lawmakers seemed to be in agreement about an urgent need to act to protect children.

Matt Fossen, U.S. communications manager for Proton, a company that makes an encrypted email service and advocates for stronger privacy protections, said kids-focused privacy legislation may have a unique advantage over broader reforms.

"Unlike other interests and pursuits and goals that exist within the privacy sphere, child privacy ... has a precedent," he said. "We have laws on the books, we have regulations on the books we can already work with. Presumably there are less hurdles that would need to be cleared to make things slightly better for American children."

Net neutrality

Biden has sent strong signals through his personnel picks and his competition executive order that he'd like to see net neutrality brought back to life. The term refers to the idea that internet service providers, or ISPs, should treat all internet traffic fairly and refrain from blocking or throttling sites and their loading speeds.

This principle was institutionalized in 2015 when the Federal Communications Commission voted to reclassify ISPs under Title II of the Communications Act of 1934, making them utilities and opening up the potential for price regulation in the future, which the ISPs opposed.

The FCC voted to repeal the rules in 2017 when it had a Republican majority during the Trump administration.

Biden's choice to lead the commission recently secured Senate confirmation for another term and his choice to serve as commissioner is awaiting a floor vote. Both have voiced support for reinstating net neutrality rules.

While Congress has discussed the possibility of legislating the principles of net neutrality into law to avoid concerns about price regulation under Title II, that will likely be an uphill battle in a closely divided Congress with many other priorities.

Gallant said the risk of net neutrality rules becoming reinstated is already "baked in" to the ISP stocks.

"There's lingering concerns among investors around Title II, but I think they feel as comfortable as they can that Chair [Jessica] Rosenworcel is an honest broker on broadband policy and as good a pick as they could get as their top regulator," he said.

Section 230

While members on both sides of the aisle have expressed enthusiasm about reforming tech's legal liability shield, Section 230 of the Communications Decency Act, many experts believe Congress is still far from altering the law.

"I'm skeptical that anything moves on 230," Gallant said. "If the Capitol riots didn't get Congress to agree on anything I'm skeptical at this point that that changes."

Democrats and Republicans disagree on the main issues with Section 230's broad liability protection for online platforms. In general, Democrats largely want to remove protections for platforms that host certain kinds of content they deem dangerous, while Republicans want to prohibit platforms from removing a wider array of speech.

Still, some bipartisan proposals have gained traction, like the EARN IT Act, which focuses on incentivizing platforms to remove child sexual abuse materials, and the PACT Act, which would promote content moderation transparency and require large platforms to remove content deemed illegal by a court.

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